Pricing strategy

One of the top distribution subjects in the last two years has been pricing strategy. In 2021 and through the first half of 2022, systems were related to dealing with supply chain shortages. More recently, inflation has been a problem to address. Customers are experiencing increases from all their major suppliers. In this scenario, how does a distributor maximize its price increase attainment?

Pricing trends and profits

It is easier to increase prices during volatile times. In a review of distribution sales in 2022, Andy Szal of Industrial Equipment News reported, “Strong pricing trends have helped the robust revenue numbers amid stubborn inflation, and despite concerns about where things could be headed in coming months, the economy seems to keep humming along.”

While strong pricing helps beef up revenue numbers, how much of those price increases translate into profits?  When we increase prices by 8% to match inflation, for example, we often see only a 6% price attainment.

Sales strategies

Here are some sales strategies you can deploy to strengthen margin and profitability and to maximize price increase attainment.

Promote your added-value worth – Before making your price increase announcement, have your sales team make a list of all the added-value solutions you offer. This should include order accuracy, pricing consistency, on-time performance, and product availability. Given this information, customers are more likely to accept your price increases.

Create a cross-functional price evaluation team – There are always reps that tend to give up on pricing more quickly than others. To offset this, create a cross-functional team that has the authority to make pricing decisions on deals below specific margin thresholds. The team should include members who are versed in determining criteria for maximizing account margins. Reps can be coached by the team on how to make better trade-offs for company profitability. Your percentages will increase.

See the value

In addition to supply chain issues and inflation, B2B channels continue to put the squeeze on distributor pricing pressure. It’s more important than ever to remember that you can’t sell a price increase if you don’t see the value of the product or service yourself.

Promote your added-value solutions and work as a team to maximize your price increase attainment.

Get tips and tricks like the above in The Art of Sales books. Or subscribe to the FREE monthly articles here.